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CBRE Realty Finance, Inc. Announces First Quarter 2007 Results and Reaffirms Full Year Forecast

Financial Results and Other Significant Events:

  • First quarter AFFO decreased 8 percent to $5.4 million, or $0.18 per diluted common share, from $5.9 million in the previous quarter.
  • Twenty-one new investments totaling $225.3 million were originated during the first quarter. Net investment originations totaled $200.8 million, an increase of 19 percent from the prior quarter.
  • Total assets increased 16 percent from the prior quarter to approximately $1.76 billion.
  • The Company priced a $1.0 billion collateralized debt obligation ("CDO") with a weighted average interest rate of three-month LIBOR plus 40.6 basis points.
  • Net income available to common stockholders for the first quarter decreased 56 percent to $1.6 million, or $0.05 per diluted common share, from $3.5 million in the previous quarter.
  • On April 25, 2007, the Company announced the resignation of Keith Gollenberg as the Company's CEO and President and as Director.
  • On April 25, 2007, the Company announced that Ray Wirta, Chairman, will assume the additional responsibilities of Executive Chairman and interim CEO and President until a permanent successor to Mr. Gollenberg is hired.
  • On April 25, 2007, the Company announced that in the near term it will no longer pursue equity real estate investments through joint ventures.

HARTFORD, Conn., May 7 /PRNewswire-FirstCall/ -- CBRE Realty Finance, Inc. (NYSE: CBF) today reported results for the quarter ended March 31, 2007.

CBRE Realty Finance reported adjusted funds from operations ("AFFO") for the first quarter of 2007 of $5.4 million, or $0.18 per diluted common share, as compared to $5.9 million, or $0.19 per diluted common share, for the fourth quarter 2006.

Net income for the first quarter 2007 was $1.6 million, or $0.05 per diluted common share, as compared to $3.5 million, or $0.12 per diluted common share, for the fourth quarter 2006.

Investment Activity

The Company originated $225.3 million of new investments during the first quarter 2007. Approximately 38 percent, or $86.5 million, of the Company's first quarter 2007 investments were originated through its CBRE|Melody network affiliation. The Company's first quarter loan and security investments had a weighted average loan-to-value ratio of 70 percent and an average term of 5.4 years, with 72.6 percent comprised of fixed rate investments.

The following is a summary of the Company's investments originated during the first quarter ended March 31, 2007:

                                                                   Floating
                                                                     Rate
                                                         Fixed     Average
                                                         Rate:      Spread
    Asset               Investments    % Allocation     Average      over
    Description (1)   ($ in millions) of Investments     Yield       LIBOR

    Whole Loans
     - floating
     rate (2)               2.1            0.9              -       L + 4.05%

    Whole Loans
     - fixed rate (2)      84.3           37.4            7.20%         -

    Structured
     - floating rate       50.0           22.2              -       L + 3.28%

    CMBS - floating rate    5.0            2.2              -       L + 1.05%

    CMBS - fixed rate      67.3           29.9            6.07%         -

    Joint Venture
     Investments           16.6            7.4              -           -

    Total / Average       225.3            100            6.70%     L + 3.11%

    (1) Debt and security investments are presented net of unamortized fees,
        discounts, and unfunded commitments.
    (2) Includes originated whole loans, acquired whole loans and bridge
        loans.

Asset spreads for floating rate originations during the quarter ended March 31, 2007 were 30-day LIBOR plus 311 basis points as compared to 30-day LIBOR plus 327 basis points in the previous quarter. Asset yields for fixed rate originations during the quarter ended March 31, 2007 were 6.70 percent as compared to 7.73 percent in the previous quarter. The Company's overall investment portfolio increased from $1.37 billion at December 31, 2006 to $1.57 billion at March 31, 2007. The Company's loan portfolio, at March 31, 2007, consisted of 32 percent floating rate and 68 percent fixed rate loans, with a weighted average maturity of 3.5 years and a weighted average loan-to- value ratio of 70 percent.

The Company in the near term will no longer pursue equity real estate investments through joint ventures, and will concentrate solely on the fixed- income arena. The Company has invested $76 million in equity real estate assets and will continue to manage these assets in accordance with their original business plan, subject to taking advantage of early opportunities to profitably exit them.

Tom Podgorski, executive vice president, commented, "Volume in the first quarter was below our expectations due to our view that asset spreads were priced extremely tight given the risk level determined during our underwriting. The recent volatility in the fixed income markets has led to a modest widening of spreads that has led to a more robust pipeline at spread levels more in line with our assessment of risk. Based on these factors we are comfortable with our full-year volume projection of $1.2-$1.3 billion."

Operating Results

Debt investments (whole loans, structured loans and CMBS) generated investment income of $25.5 million for the first quarter.

Interest expense on borrowings related to the Company's debt investments was $16.7 million for the first quarter 2007 and reflects interest expense on $508.5 million of investment grade notes issued by the Company's first collateralized debt obligation ("CDO"), borrowings under the secured warehouse repurchase facilities and $50.0 million of trust preferred securities.

Net investment income for the first quarter 2007 was $8.8 million compared to $9.4 million in the prior quarter. Net investment income represents

investment income related to its debt investments, less interest expense on the Company's borrowings related to its debt investments.

At March 31, 2007, the Company's debt-to-book equity ratio was 3.1x compared to 2.4x in the previous quarter.

The weighted average borrowing cost for the Company's secured debt and long-term capital was 6.0 percent for the quarter ended March 31, 2007 compared to 5.9 percent in the previous quarter.

During the quarter, $0.3 million, or $0.01 per diluted common share, was contributed to AFFO by the Company's consolidated and unconsolidated investments in joint ventures.

During the quarter, the Company funded an additional $4.4 million to its $31.8 million non-performing asset to cure the default on the senior loan, pay real estate taxes and pay for attorney and appraisal services relative to the loan. At March 31, 2007, the balance of this non-performing asset was $36.2 million representing 2.1 percent of total assets. In addition, in April 2007 the Company funded an additional $0.8 million on the senior loan to further protect its investment. The Company believes, and third party appraisals support, that there is collateral value in excess of the book value for this asset.

In addition, during the quarter the Company funded an additional $1.7 million to cure the default on the senior loan, pay real estate taxes and pay for attorney and appraisal services relative to the loan and recognized $0.4 million of income on its $19.7 million watch list asset. At March 31, 2007, the balance of this watch list asset was $21.8 million representing 1.2 percent of total assets. In addition, in April 2007 the Company funded an additional $0.3 million on the senior loan to further protect its investment. On May 4, 2007, the Company foreclosed on the underlying asset and subject to an estimated 30-60 day judicial ratification process, the Company will own the asset and control the exit strategy. The Company believes, and third party appraisals support, that there is collateral value in excess of the book value for this asset.

Paul Martin, executive vice president, commented, "We have foreclosed on our watch list asset and are in the process of foreclosing on our non- performing asset. Gaining control of both assets is the first step toward full recovery of value."

Also, during the quarter, the Company sold a below investment grade CMBS investment resulting in a $0.3 million loss on sale. The Company decided to exit the security early due to the identification of certain potential credit concerns as a result of our monthly CMBS portfolio review.

Liquidity and Funding

At March 31, 2007, the Company had $46.7 million of cash and cash equivalents and $60.1 million of restricted cash. The restricted cash is comprised primarily of $50.5 million of other escrow reserve requirements related to tenant improvements and leasing reserves on a number of the Company's first mortgage loans.

Loan prepayments and amortization payments totaled $24.5 million during the first quarter 2007.

On April 2, 2007, the Company closed a $1.0 billion CDO, its second CDO since inception. The Company sold $880 million of investment grade bonds to third parties and retained all of the $120 million of non-investment grade bonds and common equity. The CDO bonds were issued at a weighted average interest rate of approximately three-month LIBOR plus 40.6 basis points, an approximate 10 basis points reduction from the Company's first CDO issued in March 2006.

Dividends

On March 15, 2007, the Company announced that its Board of Directors declared a cash dividend of $0.21 per share of common stock, payable with respect to the quarter ended March 31, 2007. The dividend represented an increase of $0.04, or 24 percent, from the dividend of $0.17 made in respect to the first quarter of 2006. The dividend was paid on April 16, 2007 to stockholders of record as of the close of business on March 30, 2007.

Management

On April 25, 2007, the Company announced that Keith Gollenberg will leave the positions of Chief Executive Officer and President and resign as a Director effective immediately. Ray Wirta, Chairman, will assume the additional responsibilities of Executive Chairman and interim CEO and President while the Company recruits a permanent successor to Mr. Gollenberg.

Outlook

For fiscal year 2007, the Company reaffirms its expectation that it will generate AFFO per diluted share and diluted GAAP earnings per share of between $1.10 to $1.20 and $0.86 to $0.96, respectively.

Ray Wirta, executive chairman, commented, "We are reaffirming our full year AFFO forecast of $1.10 - $1.20. The recent change in executive leadership of the company has raised the focus on delivering on the 2007 forecast. This heightened commitment coupled with the recent increase in the deal pipeline and the potential to take advantage of early opportunities to profitably exit certain joint venture investments provide the basis for our expectation that we will deliver on the full year forecast."

Conference Call Details

The Company will host a conference call and audio webcast for investors on Tuesday, May 8, 2007, at 10:00 a.m. Eastern Time to discuss first quarter 2007 financial results. The call can be accessed live by dialing 877-715-5282 or by visiting CBRE Realty Finance, Inc.'s website at http://www.cbrerealtyfinance.com or at http://www.earnings.com .

Investors may access a replay by dialing 877-519-4471, passcode 8712702, which will be available through May 15, 2007. The webcast replay will also be archived in the "Investor Relations" section of the company's website.

About CBRE Realty Finance, Inc.

CBRE Realty Finance, Inc. is a commercial real estate specialty finance company primarily focused on originating, acquiring, investing in, financing and managing a diversified portfolio of commercial real estate-related loans and securities. CBRE Realty Finance has elected to qualify to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. CBRE Realty Finance is externally managed and advised by CBRE Realty Finance Management, LLC, an indirect subsidiary of CB Richard Ellis Group, Inc. and a direct subsidiary of CBRE/Melody & Company.

Non-GAAP Financial Measures

During the quarterly conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A reconciliation of each non-GAAP financial measure and the comparable GAAP financial measure (net income) can be found on page 8 of this release.

Forward-Looking Information

This press release contains forward-looking statements based upon the Company's beliefs, assumptions and expectations of its future performance, taking into account all information currently available. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company or are within its control. If a change occurs, the Company's business, financial condition, liquidity and results of operations may vary materially from those expressed in its forward- looking statements. The factors that could cause actual results to vary from the Company's forward-looking statements include the Company's future operating results, its business operations and prospects, general volatility of the securities market in which the Company invests and the market prices of its common stock, changes in interest rates, debt securities market, general economy or commercial finance and real estate markets specifically, credit conditions of the Company's portfolio and in the market generally, performance and financial condition of borrowers and corporate customers, increased prepayments of the mortgage and other loans underlying the Company's investments, and other factors, which are beyond the Company's control. The Company undertakes no obligation to publicly update or revise any of the

forward-looking statements. For further information, please refer to the Company's filings with the Securities and Exchange Commission.

                         Financial Tables Follow ...


                          CBRE Realty Finance, Inc.
                       Consolidated Statement of Income
      (Unaudited, amounts in thousands, except per share and share data)

                                             For the Three     For the Three
                                              Months Ended      Months Ended
                                             March 31, 2007    March 31, 2006

    Revenues:
      Investment income                            $25,540           $11,088
      Property operating income                      1,656               672
      Other income                                     382               600
        Total revenues                              27,578            12,360

    Expenses:
      Interest expense                              17,545             5,489
      Management fees                                2,064             1,427
      Property operating expenses                      901               216
      Other general and administrative
       (including $91 and $872,
       respectively of stock-based
       compensation)                                 1,795             2,477
      Depreciation/amortization                        826               253
        Total expenses                              23,131             9,862
      Loss on sale of investment                      (287)             (152)
      Gain (loss) on derivatives                      (107)            3,310
      Income from continuing operations
       before equity in net income
       of unconsolidated joint ventures              4,053             5,656
      Equity in net loss of unconsolidated
       joint ventures                               (2,530)                -
        Net income before minority interest          1,523             5,656
      Minority interest                                (52)               (9)
        Net income                                  $1,575            $5,665

    Weighted-average shares of common
     stock outstanding:
       Basic                                    30,161,774        20,000,000
       Diluted                                  30,389,938        20,161,429

    Earnings per share of common stock:
      Basic                                          $0.05             $0.28
      Diluted                                        $0.05             $0.28

    Dividends declared per share of
     common stock                                    $0.21                $-

    * $0.17 dividend declared on April 7, 2006 was made in respect to the 1st
quarter of 2006


                          CBRE Realty Finance, Inc.
                          Consolidated Balance Sheet
           (Amounts in thousands, except per share and share data)

                                                (Unaudited)        (Audited)
                                             March 31, 2007  December 31, 2006
    Assets:
      Cash & cash equivalents                      $46,653           $17,933
      Restricted cash                               60,133            59,520
      Loans and other lending
       investments, net                          1,215,370         1,090,874
      Commercial mortgage backed
       securities, at fair value                   284,882           222,333
      Real estate, net                              65,728            66,277
      Investment in joint ventures                  54,993            41,046
      Derivative assets                              1,339               373
      Accrued interest                               8,293             6,656
      Other assets                                  26,766            17,677
        Total assets                            $1,764,157        $1,522,689

    Liabilities and Stockholders' Equity:
    Liabilities:
      Bonds payable                               $508,500          $508,500
      Repurchase obligations                       664,966           433,438
      Mortgage payable                              52,561            52,194
      Derivative liabilities                         5,392             7,549
      Management fee payable                           701               712
      Dividends payable                              6,454             5,814
      Accounts payable and accrued expenses         27,565             4,739
      Other liabilities                             50,759            47,060
      Junior subordinated deferrable
       interest debentures held by
       trusts that issued trust
       preferred securities                         50,000            50,000
        Total liabilities                        1,366,898         1,110,006

      Commitments and contingencies                      -                 -

      Minority interest                                731               813

    Stockholders' Equity:
      Preferred stock, par value $.01
       per share: 50,000,0000 shares
       authorized; no shares issued or
       outstanding                                       -                 -
      Common stock, par value $.01 per
       share: 100,000,000 shares
       authorized; 30,731,342 and
       30,601,142 shares issued and
       outstanding at March 31, 2007
       and December 31, 2006 respectively              307               306
      Additional paid-in capital                   421,076           420,986
      Common stock subscription receivable               -                 -
      Accumulated other comprehensive loss         (12,024)           (1,469)
      Retained earnings (accumulated deficit)      (12,831)           (7,953)
        Total stockholders' equity                 396,528           411,870
        Total liabilities and
         stockholders' equity                   $1,764,157        $1,522,689



                          CBRE Realty Finance, Inc.
           Funds From Operations and Adjusted Funds From Operations
      (Unaudited, amounts in thousands, except per share and share data)

                                              For the Three     For the Three
                                               Months Ended      Months Ended
                                              March 31, 2007    March 31, 2006

    Funds from operations:
      Net income                                  $1,575            $5,665
      Adjustments:
        Real estate depreciation and
         amortization                                826               123
        Gain (losses) from debt
         restructuring                                 -                 -
        Gain (losses) from sale of
         property                                      -                 -
        Funds from discontinued
         operations                                    -                 -
        Real estate depreciation and
         amortization - unconsolidated
         ventures                                  3,168                 -
      Funds from operations                       $5,569            $5,788

    Adjusted funds from operations:
      Amortization of deferred stock-
       based compensation                             91               872
      Straight-line rental income -
       unconsolidated joint ventures                (127)                -
      Unrealized (gain) loss on
       derivatives                                    57              (512)
      Fair value lease revenue (SFAS
       141)                                          (11)                -
      Fair value lease revenue (SFAS
       141) - unconsolidated ventures               (187)                -
                                                  $5,392            $6,148

    Weighted-average shares of common
     stock outstanding:
      Basic                                   30,161,774        20,000,000
      Diluted                                 30,389,938        20,161,429

    FFO share of common stock:
      Basic                                        $0.18             $0.29
      Diluted                                      $0.18             $0.29

    AFFO share of common stock:
      Basic                                        $0.18             $0.31
      Diluted                                      $0.18             $0.30


Funds from Operations ("FFO") and Adjusted Funds From Operations ("AFFO") are non-GAAP financial measures, which are widely recognized measures of REIT performance. The Company computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than the Company does. The revised White Paper on FFO approved by the Board of Governors of NAREIT in April 2002 defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of properties, plus real estate depreciation and amortization and after adjustments for unconsolidated/uncombined partnerships and joint ventures. The Company presents FFO and AFFO because it considers them important supplemental measures of its operating performance and believes that they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. The Company also uses FFO and AFFO as one of several criteria to determine performance-based equity bonuses for members of the Company's senior management team. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs, providing perspective not immediately apparent from net income. The Company considers gains and losses on the sale of debt investments to be a normal part of its recurring operations and therefore does not exclude such gains and losses while arriving at FFO.

AFFO is a computation often made by REIT industry analysts and investors to measure a real estate company's cash flow generated from operations. The Company believes that AFFO is helpful to investors as a measure of its liquidity position because, along with cash generated from operating activities, this measure provides investors with an understanding of its ability to pay dividends. In addition, because this measure is commonly used in the REIT industry, the Company's use of AFFO may assist investors in comparing its liquidity position with that of other REITs. Further, it is the financial measure upon which incentive compensation payable under the Company's management agreement is payable.

The Company calculates AFFO by subtracting from or adding to FFO:

  • normalized recurring expenditures that are capitalized by us and then amortized, but which are necessary to maintain the Company's properties and revenue stream, e.g., leasing commissions and tenant improvement allowances;
  • an adjustment to reverse the effects of straight-lining of rents and fair value lease revenue under SFAS 141; and
  • the amortization or accrual of various deferred costs including intangible assets and equity based compensation
  • unrealized gains or losses on derivative transactions

The Company's calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, may not be comparable to such other REITs. Neither FFO nor AFFO represent cash generated from operating activities or net income in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as a measure of liquidity, nor is it indicative of funds available to fund the Company's cash needs, including the Company's ability to make cash distributions. The Company urges investors to carefully review the GAAP financial information included as part of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and quarterly earnings releases.

SOURCE:
CBRE Realty Finance, Inc.

CONTACT:
Michael Angerthal
Chief Financial Officer of CBRE Realty Finance
+1-860-275-6222
michael.angerthal@cbrerealtyfinance.com